The following review of operations for the three and six month periods endedJune 30, 2021 and 2020 should be read in conjunction with our Consolidated Financial Statements and the Notes to Consolidated Financial Statements included in this Form 10-Q and with the Consolidated Financial Statements, Notes to Consolidated Financial Statements and Management's Discussion and Analysis included in theNatural Resource Partners L.P. Annual Report on Form 10-K for the year endedDecember 31, 2020 . As used herein, unless the context otherwise requires: "we," "our," "us" and the "Partnership" refer toNatural Resource Partners L.P. and, where the context requires, our subsidiaries. References to "NRP" and "Natural Resource Partners " refer toNatural Resource Partners L.P. only, and not toNRP (Operating) LLC or any ofNatural Resource Partners L.P.'s subsidiaries. References to "Opco" refer toNRP (Operating) LLC , a wholly owned subsidiary of NRP, and its subsidiaries.NRP Finance Corporation ("NRP Finance") is a wholly owned subsidiary of NRP and a co-issuer with NRP on the 9.125% senior notes due 2025 (the "2025 Senior Notes"). INFORMATION REGARDING FORWARD-LOOKING STATEMENTS Statements included in this 10-Q may constitute forward-looking statements. In addition, we and our representatives may from time to time make other oral or written statements which are also forward-looking statements. Such forward-looking statements include, among other things, statements regarding: the effects of the global COVID-19 pandemic; our business strategy; our liquidity and access to capital and financing sources; our financial strategy; prices of and demand for coal, trona and soda ash, and other natural resources; estimated revenues, expenses and results of operations; projected production levels by our lessees;Ciner Wyoming LLC's ("Ciner Wyoming's") trona mining and soda ash refinery operations; distributions from our soda ash joint venture; the impact of governmental policies, laws and regulations, as well as regulatory and legal proceedings involving us, and of scheduled or potential regulatory or legal changes; and global andU.S. economic conditions. These forward-looking statements speak only as of the date hereof and are made based upon our current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. You should not put undue reliance on any forward-looking statements. See " Item 1A. Risk Factors " included in this Form 10-Q and in our Annual Report on Form 10-K for the year endedDecember 31, 2020 for important factors that could cause our actual results of operations or our actual financial condition to differ. NON-GAAP FINANCIAL MEASURES Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) less equity earnings from unconsolidated investment, net income attributable to non-controlling interest and gain on reserve swap; plus total distributions from unconsolidated investment, interest expense, net, debt modification expense, loss on extinguishment of debt, depreciation, depletion and amortization and asset impairments. Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income or loss, net income or loss attributable to partners, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance, liquidity or ability to service debt obligations. There are significant limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the effect of certain recurring items that materially affect our net income, the lack of comparability of results of operations of different companies and the different methods of calculating Adjusted EBITDA reported by different companies. In addition, Adjusted EBITDA presented below is not calculated or presented on the same basis as Consolidated EBITDA as defined in our partnership agreement or Consolidated EBITDDA as defined in Opco's debt agreements. For a description of Opco's debt agreements, see Note 8. Debt, Net in the Notes to Consolidated Financial Statements included herein as well as in "Item 8. Financial Statements and Supplementary Data-Note 11. Debt, Net" in our Annual Report on Form 10-K for the year endedDecember 31, 2020 . Adjusted EBITDA is a supplemental performance measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis. 19
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Table of Contents Distributable Cash Flow Distributable cash flow ("DCF") represents net cash provided by (used in) operating activities of continuing operations plus distributions from unconsolidated investment in excess of cumulative earnings, proceeds from asset sales and disposals, including sales of discontinued operations, and return of long-term contract receivables; less maintenance capital expenditures and distributions to non-controlling interest. DCF is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities. DCF may not be calculated the same for us as for other companies. In addition, DCF presented below is not calculated or presented on the same basis as distributable cash flow as defined in our partnership agreement, which is used as a metric to determine whether we are able to increase quarterly distributions to our common unitholders. DCF is a supplemental liquidity measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to asses our ability to make cash distributions and repay debt. Free Cash Flow Free cash flow ("FCF") represents net cash provided by (used in) operating activities of continuing operations plus distributions from unconsolidated investment in excess of cumulative earnings and return of long-term contract receivables; less maintenance and expansion capital expenditures, cash flow used in acquisition costs classified as investing or financing activities. FCF is calculated before mandatory debt repayments. FCF is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities. FCF may not be calculated the same for us as for other companies. FCF is a supplemental liquidity measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess our ability to make cash distributions and repay debt. Introduction The following discussion and analysis presents management's view of our business, financial condition and overall performance. Our discussion and analysis consists of the following subjects: •Executive Overview •Results of Operations •Liquidity and Capital Resources •Off-Balance Sheet Transactions •Related Party Transactions •Summary of Critical Accounting Estimates •Recent Accounting Standards 20
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Table of Contents Executive Overview We are a diversified natural resource company engaged principally in the business of owning, managing and leasing a diversified portfolio of mineral properties inthe United States , including interests in coal and other natural resources and own a non-controlling 49% interest in Ciner Wyoming, a trona ore mining and soda ash production business. Our common units trade on theNew York Stock Exchange under the symbol "NRP." Our business is organized into two operating segments: Coal Royalty and Other-consists primarily of coal royalty properties and coal-related transportation and processing assets. Other assets include industrial mineral royalty properties, aggregates royalty properties, oil and gas royalty properties and timber. Our coal reserves are primarily located in Appalachia, theIllinois Basin and theNorthern Powder River Basin inthe United States . Our industrial minerals and aggregates properties are located in various states acrossthe United States , our oil and gas royalty assets are primarily located inLouisiana and our timber assets are primarily located inWest Virginia . Soda Ash-consists of our 49% non-controlling equity interest in Ciner Wyoming, a trona ore mining and soda ash production business located in theGreen River Basin ofWyoming . Ciner Wyoming mines the trona and processes it into soda ash that is sold both domestically and internationally into the glass and chemicals industries. In addition to actively managing its currently producing coal and hard mineral properties over the last year, we continue working to identify alternative revenue sources across our large portfolio of land, mineral and timber assets. The types of opportunities we are exploring include the sequestration of carbon dioxide underground and in standing forests, and the generation of electricity using geothermal, solar and wind energy. While the timing and likelihood of cash flows being realized from any of these activities is highly uncertain, we believe our large ownership footprint throughoutthe United States will provide opportunities to create value in this regard with minimal capital investment. Corporate and Financing includes functional corporate departments that do not earn revenues. Costs incurred by these departments include interest and financing, corporate headquarters and overhead, centralized treasury, legal and accounting and other corporate-level activity not specifically allocated to a segment. Our financial results by segment for the six months endedJune 30, 2021 are as follows: Operating Segments Coal Royalty Corporate and (In thousands) and Other Soda Ash Financing Total Revenues and other income$ 71,087 $ 4,574 $ -$ 75,661 Net income (loss)$ 46,374 $ 4,519 $ (27,130) $ 23,763 Adjusted EBITDA (1)$ 60,420 $ 3,865 $ (7,498) $ 56,787 Cash flow provided by (used in) continuing operations Operating activities$ 57,990 $ 3,853 $ (25,259) $ 36,584 Investing activities$ 1,257 $ - $ -$ 1,257 Financing activities$ (1,132) $ -$ (38,591) $ (39,723) Distributable cash flow (1)$ 59,247 $ 3,853 $ (25,259) $ 37,841 Free cash flow (1)$ 58,072 $ 3,853 $ (25,259) $ 36,666
(1)See "-Results of Operations" below for reconciliations to the most comparable GAAP financial measures.
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Table of Contents Current Results/Market Commentary Business Outlook and Quarterly Distributions Demand for metallurgical and thermal coals and soda ash continue to rebound from their lows in 2020 caused by the global COVID-19 pandemic. We generated$36.7 million of free cash flow during the six months endedJune 30, 2021 , and ended the quarter with$197.9 million of liquidity consisting of$97.9 million of cash and cash equivalents and$100.0 million of borrowing capacity under our Opco Credit Facility. Despite our steady liquidity, our consolidated leverage ratio has risen since early 2020 and was 4.6x atJune 30, 2021 . The indenture governing our 2025 parent company notes restricts us from paying more than one-half of the quarterly distribution on our preferred units in cash if our consolidated leverage ratio exceeds 3.75x. Accordingly, the Board of Directors of our general partner has declared a distribution on our preferred units to be paid one-half in kind through the issuance of additional preferred units ("PIK units") for the past four quarters. We expect our leverage ratio to now begin to decline as we continue to pay down debt. Under the terms of our partnership agreement, to the extent our consolidated leverage ratio remains above 3.75x into 2022 and we therefore remain unable to redeem any outstanding paid-in-kind preferred units, we may be required to temporarily suspend distributions on our common units until the leverage ratio drops below 3.75x and the outstanding paid-in-kind preferred units are redeemed. Future distributions on NRP's common and preferred units will be determined on a quarterly basis by the Board of Directors. The Board of Directors considers numerous factors each quarter in determining cash distributions, including profitability, cash flow, debt service obligations, covenants in our debt and partnership agreements, market conditions and outlook, estimated unitholder income tax liability and the level of cash reserves that the Board determines is necessary for future operating and capital needs. Coal Royalty and Other Business Segment Metallurgical coal markets have rebounded from the lows seen in 2020 and the outlook remains strong as steel demand driven by global economic recovery is more than offsetting challenges related to the COVID-19 pandemic. Domestic and export thermal coal markets have significantly improved from the lows seen in 2020, but still face ongoing negative effects of the COVID-19 pandemic and the long-term challenges of lower electricity demand, competition from natural gas, and the secular shift to renewable energy. However, NRP does not have significant sensitivity to thermal coal price movements this year since the substantial majority of NRP's thermal cash flows are fixed through 2021 pursuant to a contract with Foresight Energy that went into effect as they emerged from bankruptcy last year. Our lessees sold 13.1 million tons of coal from our properties in the first six months of 2021 and we derived approximately 60% of our coal royalty revenues and approximately 45% of our coal royalty sales volumes from metallurgical coal during the same period. Soda Ash Business Segment Ciner Wyoming's business continues to recover to pre-COVID-19 levels. While we believe Ciner Wyoming's facility is competitively positioned as one of the lowest cost producers of soda ash in the world, we expect the market to remain volatile as a result of ongoing uncertainties with the COVID-19 pandemic. Revenues and other income in the first six months of 2021 were higher by$1.4 million compared to the prior year period primarily as a result of an increase in sales volumes as demand for soda ash rebounded from lows caused by the global COVID-19 pandemic. In order to have financial flexibility during the COVID-19 pandemic, CinerWyoming suspended its regular quarterly distributions in the third quarter of 2020. Ciner Wyoming will continue to evaluate, on a quarterly basis, whether to reinstate the distribution. Ciner Wyoming's ability to pay future quarterly distributions will be dependent in part on its cash reserves, liquidity, total debt levels and anticipated capital expenditures. Distributions received from Ciner Wyoming were$3.9 million in the first six months of 2021 as compared to$14.2 million in the first six months of 2020. Although Ciner Wyoming made a special distribution to its members in the first quarter of 2021, we do not believe Ciner Wyoming will resume regular quarterly distributions until they have greater visibility and confidence in global soda markets. 22
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Table of Contents When considering the significant investment required by Ciner Wyoming's previously announced expansion project and the infrastructure improvements designed to increase overall efficiency, combined with the COVID-19 pandemic's negative impact on Ciner Wyoming's financial results, Ciner Wyoming has reprioritized the timing of the significant capital expenditure items in order to increase financial and liquidity flexibility until it has more clarity and visibility into the ongoing impact of the COVID-19 pandemic on its business. Results of Operations Second Quarter of 2021 and 2020 Compared Revenues and Other Income The following table includes our revenues and other income by operating segment: For the Three Months Ended June 30, Percentage Operating Segment (In thousands) 2021 2020 Increase Change Coal Royalty and Other$ 35,909 $ 34,069 $ 1,840 5 % Soda Ash 2,601 (3,058) 5,659 185 % Total$ 38,510 $ 31,011 $ 7,499 24 %
The changes in revenues and other income is discussed for each of the operating segments below:
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Table of Contents Coal Royalty and Other The following table presents coal sales volumes, coal royalty revenue per ton and coal royalty revenues by major coal producing region, the significant categories of other revenues and other income: For the Three Months
Ended June
30, Increase Percentage (In thousands, except per ton data) 2021 2020 (Decrease) Change Coal sales volumes (tons) Appalachia Northern 405 87 318 366 % Central 2,975 2,463 512 21 % Southern 316 426 (110) (26) % Total Appalachia 3,696 2,976 720 24 % Illinois Basin 2,640 578 2,062 357 % Northern Powder River Basin 185 340 (155) (46) % Total coal sales volumes 6,521 3,894 2,627 67 % Coal royalty revenue per ton Appalachia Northern$ 4.45 $ 2.74 $ 1.71 62 % Central 4.62 4.04 0.58 14 % Southern 7.63 4.96 2.67 54 % Illinois Basin 2.01 1.97 0.04 2 % Northern Powder River Basin 4.15 3.15 1.00 32 % Combined average coal royalty revenue per ton 3.69 3.73 (0.04) (1) % Coal royalty revenues Appalachia Northern$ 1,804 $ 238 $ 1,566 658 % Central 13,756 9,951 3,805 38 % Southern 2,410 2,111 299 14 % Total Appalachia 17,970 12,300 5,670 46 % Illinois Basin 5,300 1,137 4,163 366 % Northern Powder River Basin 768 1,071 (303) (28) % Unadjusted coal royalty revenues 24,038 14,508 9,530 66 % Coal royalty adjustment for minimum leases (1) (5,740) (3,661) (2,079) (57) % Total coal royalty revenues$ 18,298 $ 10,847 $ 7,451 69 % Other revenues Production lease minimum revenues (1)$ 3,556 $ 8,485 $ (4,929) (58) % Minimum lease straight-line revenues (1) 4,869 4,987 (118) (2) % Property tax revenues 1,587 761 826 109 % Wheelage revenues 1,844 1,584 260 16 % Coal overriding royalty revenues 976 683 293 43 % Lease amendment revenues 772 890 (118) (13) % Aggregates royalty revenues 456 271 185 68 % Oil and gas royalty revenues 900 2,742 (1,842) (67) % Other revenues 353 416 (63) (15) % Total other revenues$ 15,313 $ 20,819 $ (5,506) (26) % Coal royalty and other$ 33,611 $ 31,666 $ 1,945 6 % Transportation and processing services revenues 2,182 1,938 244 13 % Gain on asset sales and disposals 116 465 (349) (75) % Total Coal Royalty and Other segment revenues and 5 % other income$ 35,909 $ 34,069 $ 1,840 (1)BeginningApril 1, 2020 and effectiveJanuary 1, 2020 , certain revenues previously classified as coal royalty revenues are classified as production lease minimum revenues or minimum lease straight-line revenues due to contract modifications with Foresight that fixed consideration paid to us over a two-year period. 24
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Table of Contents Coal Royalty Revenues Approximately 65% of coal royalty revenues and approximately 50% of coal royalty sales volumes were derived from metallurgical coal during the three months endedJune 30, 2021 . Total coal royalty revenues increased$7.5 million as compared to the prior year quarter as a result of increased demand for both metallurgical and thermal coals from their lows in 2020 caused by the global COVID-19 pandemic. The discussion by region is as follows: •Appalachia: Coal royalty revenues increased$5.7 million primarily due to a 24% increase in sales volumes in addition to higher sales prices as compared to the prior year quarter. •Illinois Basin: Coal royalty revenues increased$4.2 million primarily due to a 357% increase in sales volumes for the three months endedJune 30, 2021 as compared to the prior year quarter. In the second quarter of 2020, we entered into lease amendments with Foresight pursuant to which Foresight agreed to pay us fixed cash payments to satisfy all obligations arising out of the existing various coal mining leases and transportation infrastructure fee agreements between us and Foresight for calendar years 2020 and 2021. As a result of these amendments, actual revenues recognized from Foresight were flat period-over-period. •Northern PowderRiver Basin : Coal royalty revenues decreased$0.3 million primarily due to a 46% decrease in sales volumes as our lessee mined on our property less during the second quarter of 2021 as compared to the prior year quarter in accordance with its mine plan, partially offset by a 32% increase in sales prices as compared to the prior year quarter. Other Revenues Other revenues decreased$5.5 million primarily due to decreased production lease minimum revenues as a result of the contract modifications with Foresight beginning to be accounted for in the second quarter of 2020 as discussed above. Soda Ash Revenues and other income related to our Soda Ash segment increased$5.7 million compared to the prior year quarter primarily as a result of increased in sales volumes as demand for soda ash continued to rebound from its low in 2020 caused by the global COVID-19 pandemic. Operating Expenses The following table presents the significant categories of our consolidated operating expenses: For the Three Months Ended June 30, Increase Percentage (In thousands) 2021 2020 (Decrease) Change Operating expenses Operating and maintenance expenses$ 5,170 $ 8,217 $ (3,047) (37) % Depreciation, depletion and amortization 4,871 2,062 2,809 136 % General and administrative expenses 3,388 3,621 (233) (6) % Asset impairments 16 132,283 (132,267) (100) % Total operating expenses$ 13,445 $ 146,183 $ (132,738) (91) % Total operating expenses decreased$132.7 million primarily due to a$132.3 million decrease in asset impairments. Asset impairments in the three months endedJune 30, 2020 were due to weakened coal markets that resulted in termination of certain coal leases, changes to lessee mine plans resulting in permanent moves off certain of our coal properties and decreased oil and gas drilling activity which negatively impacted the outlook for NRP's frac sand properties. The$3.0 million decrease in operating and maintenance expenses was primarily due to a decrease in bad debt expense. These decreases were partially offset by a$2.8 million increase in depreciation, depletion and amortization expense as a result of increased production at certainIllinois Basin coal properties. 25
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Adjusted EBITDA (Non-GAAP Financial Measure) The following table reconciles net income (loss) (the most comparable GAAP financial measure) to Adjusted EBITDA by business segment:
Operating
Segments
Coal Royalty Corporate and For the Three Months Ended (In thousands) and Other Soda Ash Financing TotalJune 30, 2021 Net income (loss)$ 25,886 $ 2,566 $ (13,070) $ 15,382 Less: equity earnings from unconsolidated investment - (2,601) - (2,601) Add: interest expense, net 1 - 9,682 9,683 Add: depreciation, depletion and amortization 4,871 - - 4,871 Add: asset impairments 16 - - 16 Adjusted EBITDA$ 30,774 $ (35) $ (3,388) $ 27,351 June 30, 2020 Net loss$ (108,479) $ (3,087) $ (13,935) $ (125,501) Less: equity earnings from unconsolidated investment - 3,058 - 3,058 Add: total distributions from unconsolidated investment - 7,105 - 7,105 Add: interest expense, net 15 - 10,314 10,329 Add: depreciation, depletion and amortization 2,062 - - 2,062 Add: asset impairments 132,283 - - 132,283 Adjusted EBITDA$ 25,881 $ 7,076 $ (3,621) $ 29,336 Adjusted EBITDA decreased$2.0 million primarily due to$7.1 million of lower cash distributions received from Ciner Wyoming in the in second quarter of 2021 as compared to the second quarter of 2020, partially offset by a$4.9 million increase in Adjusted EBITDA within our Coal Royalty and Other segment as a result of lower operating and maintenance expenses and higher revenues and other income, both discussed above. Distributable Cash Flow ("DCF") and Free Cash Flow ("FCF") (Non-GAAP Financial Measures) The following table presents the three major categories of the statement of cash flows by business segment: Operating Segments Coal Royalty Corporate and For the Three Months Ended (In thousands) and Other Soda Ash Financing Total June 30, 2021 Cash flow provided by (used in) continuing operations Operating activities$ 32,028 $ (35) $ (18,609) $ 13,384 Investing activities 657 - - 657 Financing activities (1,000) - (11,900) (12,900) June 30, 2020 Cash flow provided by (used in) continuing operations Operating activities$ 31,953 $ 7,077 $ (19,095) $ 19,935 Investing activities 365 - - 365 Financing activities - - (9,978) (9,978) 26
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The following table reconciles net cash provided by (used in) operating activities of continuing operations (the most comparable GAAP financial measure) by business segment to DCF and FCF:
Operating
Segments
Coal Royalty Corporate and For the Three Months Ended (In thousands) and Other Soda Ash Financing TotalJune 30, 2021 Net cash provided by (used in) operating activities of continuing operations$ 32,028 $
(35)
Add: proceeds from asset sales and disposals 116 - - 116 Add: return of long-term contract receivable 541 - - 541 Distributable cash flow$ 32,685 $ (35) $ (18,609) $ 14,041 Less: proceeds from asset sales and disposals (116) - - (116) Less: acquisition costs (1,000) - - (1,000) Free cash flow$ 31,569 $ (35) $ (18,609) $ 12,925 June 30, 2020 Net cash provided by (used in) operating activities of continuing operations$ 31,953 $
7,077
Add: proceeds from asset sales and disposals 507 - - 507 Add: return of long-term contract receivable 858 - - 858 Distributable cash flow$ 33,318 $ 7,077 $ (19,095) $ 21,300 Less: proceeds from asset sales and disposals (507) - - (507) Less: acquisition costs (1,000) - - (1,000) Free cash flow$ 31,811 $ 7,077 $ (19,095) $ 19,793 DCF and FCF decreased$7.3 million and$6.9 million , respectively, primarily due to the following: •Coal Royalty and Other Segment •DCF and FCF were relatively flat in the second quarter of 2021 as compared to the prior year period as increased coal royalty cash flow due to stronger coal demand in the second quarter of 2021 was offset by$5 million of increased cash flow in the second quarter of 2020 related to the emergence of a lessee from bankruptcy. •Soda Ash Segment •DCF and FCF decreased$7.1 million primarily as a result of cash distributions received from Ciner Wyoming in the second quarter of 2020. As previously mentioned, Ciner Wyoming suspended its regular quarterly distributions in the third quarter of 2020. 27
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Table of Contents Results of Operations First Six Months of 2021 and 2020 Compared Revenues and Other Income The following table includes our revenues and other income by operating segment: For the Six Months Ended June 30, Percentage Operating Segment (In thousands) 2021 2020 Increase Change Coal Royalty and Other$ 71,087 $ 68,011 $ 3,076 5 % Soda Ash 4,574 3,214 1,360 42 % Total$ 75,661 $ 71,225 $ 4,436 6 %
The changes in revenues and other income is discussed for each of the operating segments below:
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Table of Contents Coal Royalty and Other The following table presents coal sales volumes, coal royalty revenue per ton and coal royalty revenues by major coal producing region, the significant categories of other revenues and other income: For the Six Months
Ended June
30, Increase Percentage (In thousands, except per ton data) 2021 2020 (Decrease) Change Coal sales volumes (tons) Appalachia Northern 525 414 111 27 % Central 5,625 5,396 229 4 % Southern 416 648 (232) (36) % Total Appalachia 6,566 6,458 108 2 % Illinois Basin 5,298 1,083 4,215 389 % Northern Powder River Basin 1,244 867 377 43 % Total coal sales volumes 13,108 8,408 4,700 56 % Coal royalty revenue per ton Appalachia Northern$ 4.27 $ 2.01 $ 2.26 112 % Central 4.44 4.47 (0.03) (1) % Southern 7.06 4.68 2.38 51 % Illinois Basin 2.04 3.08 (1.04) (34) % Northern Powder River Basin 3.49 3.75 (0.26) (7) % Combined average coal royalty revenue per ton 3.45 4.11 (0.66) (16) % Coal royalty revenues Appalachia Northern$ 2,241 $ 831 $ 1,410 170 % Central 24,951 24,124 827 3 % Southern 2,938 3,034 (96) (3) % Total Appalachia 30,130 27,989 2,141 8 % Illinois Basin 10,783 3,336 7,447 223 % Northern Powder River Basin 4,341 3,248 1,093 34 % Unadjusted coal royalty revenues 45,254 34,573 10,681 31 % Coal royalty adjustment for minimum leases (11,591) (4,624) (6,967) (151) % Total coal royalty revenues$ 33,663 $ 29,949 $ 3,714 12 % Other revenues Production lease minimum revenues$ 7,006 $ 9,287 $ (2,281) (25) % Minimum lease straight-line revenues 10,965 8,796 2,169 25 % Property tax revenues 3,056 2,360 696 29 % Wheelage revenues 3,625 3,788 (163) (4) % Coal overriding royalty revenues 2,835 2,005 830 41 % Lease amendment revenues 1,640 1,733 (93) (5) % Aggregates royalty revenues 910 847 63 7 % Oil and gas royalty revenues 2,266 3,845 (1,579) (41) % Other revenues 572 489 83 17 % Total other revenues$ 32,875 $ 33,150 $ (275) (1) % Coal royalty and other$ 66,538 $ 63,099 $ 3,439 5 % Transportation and processing services revenues 4,374 4,447 (73) (2) % Gain on asset sales and disposals 175 465 (290) (62) % Total Coal Royalty and Other segment revenues and other income$ 71,087 $ 68,011 $ 3,076 5 % 29
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Table of Contents Coal Royalty Revenues Approximately 60% of coal royalty revenues and approximately 45% of coal royalty sales volumes were derived from metallurgical coal during the six months endedJune 30, 2021 . Total coal royalty revenues increased$3.7 million during the six months endedJune 30, 2021 as compared to the prior year period primarily as a result of increased demand for both metallurgical and thermal coals from their lows in 2020 caused by the global COVID-19 pandemic. The discussion by region is as follows: •Appalachia: Coal royalty revenues increased$2.1 million primarily due to a 2% increase in sales volumes in addition to higher sales prices as compared to the prior year. •Illinois Basin: Coal royalty revenues increased$7.4 million primarily due to a 389% increase in sales volumes, partially offset by a 34% decrease in sales prices as compared to the prior year period. As previously mentioned, we entered into lease amendments with Foresight pursuant to which Foresight agreed to pay us fixed cash payments to satisfy all obligations arising out of the existing various coal mining leases and transportation infrastructure fee agreements between the us and Foresight for calendar years 2020 and 2021 and as a result actual revenues from Foresight were flat period-over-period. •Northern PowderRiver Basin : Coal royalty revenues increased$1.1 million primarily due to a 43% increase in sales volumes related to our lessee mining on our property in accordance with its mine plan in 2021, partially offset by a 7% decrease in sales prices as compared to the prior year. Soda Ash Revenues and other income related to our Soda Ash segment increased$1.4 million compared to the prior year primarily as a result of increased in sales volumes as demand for soda ash continued to rebound from its low in 2020 caused by the global COVID-19 pandemic. Operating Expenses The following table presents the significant categories of our consolidated operating expenses: For the Six Months Ended June 30, Increase Percentage (In thousands) 2021 2020 (Decrease) Change Operating expenses Operating and maintenance expenses$ 10,722 $ 13,419 $ (2,697) (20) % Depreciation, depletion and amortization 9,963 4,074 5,889 145 % General and administrative expenses 7,498 7,534 (36) - % Asset impairments 4,059 132,283 (128,224) (97) % Total operating expenses$ 32,242 $ 157,310 $ (125,068) (80) % Total operating expenses decreased$125.1 million primarily due to a$128.2 million decrease in asset impairments. Asset impairments in the first six months of 2021 primarily related to a lease termination while asset impairments in the first six months of 2020 were due to weakened coal markets that resulted in termination of certain coal leases, changes to lessee mine plans resulting in permanent moves off certain of our coal properties and decreased oil and gas drilling activity which negatively impacted the outlook for NRP's frac sand properties. The$2.7 million decrease in operating and maintenance expenses was primarily due to a decrease in bad debt expense. These decreases were partially offset by a$5.9 million increase in depreciation, depletion and amortization expense primarily as a result of increased production at certainIllinois Basin coal properties. 30
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Adjusted EBITDA (Non-GAAP Financial Measure) The following table reconciles net income (loss) (the most comparable GAAP financial measure) to Adjusted EBITDA by business segment:
Operating
Segments
Coal Royalty and Corporate and For the Six Months Ended (In thousands) Other Soda Ash Financing TotalJune 30, 2021 Net income (loss)$ 46,374 $ 4,519 $ (27,130) $ 23,763 Less: equity earnings from unconsolidated investment - (4,574) - (4,574) Add: total distributions from unconsolidated investment - 3,920 - 3,920 Add: interest expense, net 24 - 19,632 19,656 Add: depreciation, depletion and amortization 9,963 - - 9,963 Add: asset impairments 4,059 - - 4,059 Adjusted EBITDA$ 60,420 $ 3,865 $ (7,498) $ 56,787 June 30, 2020 Net income (loss)$ (81,735)
- (3,214) - (3,214) Add: total distributions from unconsolidated investment - 14,210 - 14,210 Add: interest expense, net 15 - 20,622 20,637 Add: depreciation, depletion and amortization 4,074 - - 4,074 Add: asset impairments 132,283 - - 132,283 Adjusted EBITDA$ 54,637 $ 14,165 $ (7,534) $ 61,268 Adjusted EBITDA decreased$4.5 million primarily due to$10.3 million of lower cash distributions received from Ciner Wyoming in the first six months of 2021 as compared to the prior year, partially offset by a$5.8 million increase in Adjusted EBITDA within our Coal Royalty and Other segment as a result of lower operating and maintenance expenses and higher revenues and other income, both discussed above. Distributable Cash Flow ("DCF") and Free Cash Flow ("FCF") (Non-GAAP Financial Measures) The following table presents the three major categories of the statement of cash flows by business segment: Operating Segments Coal Royalty Corporate and For the Six Months Ended (In thousands) and Other Soda Ash Financing Total June 30, 2021 Cash flow provided by (used in) continuing operations Operating activities$ 57,990 $ 3,853 $ (25,259) $ 36,584 Investing activities 1,257 - - 1,257 Financing activities (1,132) - (38,591) (39,723) June 30, 2020 Cash flow provided by (used in) continuing operations Operating activities$ 62,509 $ 14,166 $ (26,585) $ 50,090 Investing activities 637 - - 637 Financing activities - - (38,164) (38,164) 31
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The following table reconciles net cash provided by (used in) operating activities of continuing operations (the most comparable GAAP financial measure) by business segment to DCF and FCF:
Operating
Segments
Coal Royalty Corporate and For the Six Months Ended (In thousands) and Other Soda Ash Financing TotalJune 30, 2021 Net cash provided by (used in) operating activities of continuing operations$ 57,990 $
3,853
Add: proceeds from asset sales and disposals 175 - - 175 Add: return of long-term contract receivable 1,082 - - 1,082 Distributable cash flow$ 59,247 $ 3,853 $ (25,259) $ 37,841 Less: proceeds from asset sales and disposals (175) - - (175) Less: acquisition costs (1,000) - - (1,000) Free cash flow$ 58,072 $ 3,853 $ (25,259) $ 36,666 June 30, 2020 Net cash provided by (used in) operating activities of continuing operations$ 62,509 $ 14,166 $ (26,585) $ 50,090 Add: proceeds from asset sales and disposals 507 - - 507 Add: proceeds from sale of discontinued operations - - - (66) Add: return of long-term contract receivable 1,130 - - 1,130 Distributable cash flow$ 64,146 $ 14,166 $ (26,585) $ 51,661 Less: proceeds from asset sales and disposals (507) - - (507) Less: proceeds from sale of discontinued operations - - - 66 Less: acquisition costs (1,000) - - (1,000) Free cash flow$ 62,639 $ 14,166 $ (26,585) $ 50,220 DCF and FCF decreased$13.8 million and$13.6 million , respectively, primarily due to the following: •Coal Royalty and Other Segment •DCF and FCF decreased$4.9 million and$4.6 million , respectively, primarily as a result of$5.7 million of lease amendment fee payments received in 2020. This decrease was partially offset by increased cash flow in 2021 primarily as a result of the rebounding of coal demand from its low in 2020 caused by the global COVID-19 pandemic. •Soda Ash Segment •DCF and FCF decreased$10.3 million as a result of lower cash distributions received from Ciner Wyoming in the first six months of 2021 as compared to the prior year. As previously mentioned, although Ciner Wyoming made a special distribution to its members in the first quarter of 2021, Ciner Wyoming suspended its regular quarterly distributions in the third quarter of 2020. Liquidity and Capital Resources Current Liquidity As ofJune 30, 2021 , we had total liquidity of$197.9 million , consisting of$97.9 million of cash and cash equivalents and$100.0 million of borrowing capacity under our Opco Credit Facility. We have significant debt service obligations, including approximately$20 million of principal repayments on Opco's senior notes throughout the remainder of 2021. We believe our liquidity position provides us with the flexibility to continue paying down debt and manage our business through the current market environment. 32
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Table of Contents Cash Flows Cash flows provided by operating activities decreased$15.2 million , from$51.8 million in the six months endedJune 30, 2020 to$36.6 million in the six months endedJune 30, 2021 , primarily related to$10.3 million of lower cash distributions received from Ciner Wyoming in the first six months of 2021 as compared to the prior year quarter and lower operating cash flow within our Coal Royalty and Other segment primarily as a result of$5.7 million of lease amendment fee payments received in 2020. These decreases were partially offset by increased cash flow in 2021 primarily as a result of the rebounding of coal demand from its low in 2020 caused by the global COVID-19 pandemic and$1.3 million of lower cash paid for interest as our debt balance continues to decline. Capital Resources and Obligations Debt, Net We had the following debt outstanding as ofJune 30, 2021 andDecember 31, 2020 :June 30 , December
31,
(In thousands) 2021 2020 Current portion of long-term debt, net$ 39,060 $ 39,055 Long-term debt, net 414,099 432,444 Total debt, net$ 453,159 $ 471,499 We have been and continue to be in compliance with the terms of the financial covenants contained in our debt agreements. For additional information regarding our debt and the agreements governing our debt, including the covenants contained therein, see Note 8. Debt, Net to the Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q. Off-Balance Sheet Transactions We do not have any off-balance sheet arrangements with unconsolidated entities or related parties and accordingly, there are no off-balance sheet risks to our liquidity and capital resources from unconsolidated entities. Related Party Transactions The information required set forth under Note 10. Related Party Transactions to the Consolidated Financial Statements is incorporated herein by reference. Summary of Critical Accounting Estimates The preparation of Consolidated Financial Statements in conformity with generally accepted accounting principles inthe United States of America requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. There have been no significant changes to our critical accounting estimates from those disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2020 . Recent Accounting Standards The information set forth under Note 1. Basis of Presentation to the Consolidated Financial Statements is incorporated herein by reference. 33
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